Sustainability in Food: How General Mills is Combating Climate Change

Failure to Act on Climate Change Will Hurt General Mills’ Top and Bottom Lines

Failure to Act on Climate Change Will Hurt General Mills’ Top and Bottom Lines

General Mills, one of the largest consumer packaged food companies in the world, recently celebrated its 150th birthday in 2017. To ensure continued success over the next 150 years, the company must address the sustainability of its supply chain and the sourcing of raw materials.

Addressing climate change has significant implications for both General Mills’ bottom-line profitability and top-line revenue streams. As reported in a Nielsen Global Survey on Corporate Social Responsibility, most global consumers are willing to pay a premium to support products and companies that are committed to improving the sustainability of their products [1]. Other studies have found that 84% of consumers seek out responsibly sourced products whenever possible [2]. Millennials, in particular, are cognizant about purchasing brands that support their values, and have repeatedly shown that their loyalty to companies that pledge to fight climate change [2].

Climate change is no longer a fringe issue for consumers—rather, it is top of mind. As consumers become more and more aware of the importance of addressing climate change, it will look to big players, like General Mills, to make big strides. Failure to address these concerns will cause consumers to oust and expose General Mills’ supply chain for its role in instigating climate change, instead of recognizing General Mills’ efforts to mitigate the impact of climate change.

 

Current Short- and Long-Term Action Steps Undertaken by General Mills to Address Climate Change

Currently, 92% of greenhouse gas emissions linked to the General Mills value chain occur in entities that are not actually controlled by the company [5]. These “Scope-3” emissions typically occur before General Mills has sourced the products or after consumers have disposed of the products it sells [4]. Although technically beyond their control, General Mills has maintained its commitment to addressing climate change within the total supply chain.

What management is doing for the short-term:

  • General Mills has committed to achieving net zero deforestation throughout the supply chain, an effort to conserve high carbon stock forests [5].
  • In October 2017, the company announced plans to fund the production of a 100 mega-watts of renewable wind powerplant in rural Texas [3].

What management is doing for the long-term:

  • General Mills also plans to partner with various organizations around the globe that will help improve the sustainability of key ingredients [8].
  • General Mills published its plan to sustainably source all its top ten priority ingredients by 2020 [6].

Source: General Mills and Food Business News [8]

General Mills’ efforts have not gone unnoticed. In 2015, the company was named to the CDP (Carbon Disclosure Project) Climate A-list, a United Kingdom based thinktank which works to help companies reduce their emissions footprint. The Climate A-List also placed General Mills among the top 3% of corporations for their efforts in engaging suppliers to reduce emissions and mitigate climate change [7]. In 2016, General Mills reduced the greenhouse gas emissions associated with its value chain by 2% year-over-year [5]. Since 2010, General Mills has reduced greenhouse gas emissions by 13% [6].

 

Further Recommendations: General Mills Must Take Its Sustainability Efforts to Its New Products On Shelf 

While the steps that General Mills has taken are a good start, much more is to be done to address climate change within the company’s supply chain in the short- and medium-term:

Three recommendations for General Mills moving forward:

  • Recommendation #1: Mills should prioritize launching new products that do not contain ingredients known to contribute to climate change. For example, palm oil is notorious for being harvested in ways that release high amounts of carbon [9]. Palm oil substitutes should be considered when developing new product launches.
  • Recommendation #2: Mills should expand partnerships with global humanitarian organizations to ensure that all ingredients are sustainably sourced. For example, in Ghana, General Mills developed a partnership with Barry Callebaut, an organization that helps to develop sustainable cocoa farming practices in the region [8]. These types of partnerships should be expanded across the globe.
  • Recommendation #3: Mills must work to educate consumers about the importance of reducing the detrimental effects of climate change. Packaging, branding, and messaging are critical to helping consumers understand the impact of climate change on the products that they love. Ensuring that the products sold on shelf highlight the importance of sustainability will not only drive sales, but will simultaneously educate consumers about what they can do to help drive positive change as well.

 

Remaining Questions:

As the effects of climate change become more and more pronounced, consumers may wonder whether big companies such as General Mills are doing more good or creating more harm. How can big companies successfully demonstrate their commitment to addressing climate change while continuing to grow their top and bottom lines?

 

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[1] “Global Consumers Are Willing to Put Their Money Where Their Heart Is When It Comes to Goods and Services from Companies Committed to Social Responsibility.” What People Watch, Listen To and Buy, Nielsen, 17 June 2014. http://www.nielsen.com/us/en/press-room/2014/global-consumers-are-willing-to-put-their-money-where-their-heart-is.html

[2] Sustainable Brands. Study: 81% of Consumers Say They Will Make Personal Sacrifices to Address Social, Environmental Issues. Sustainable Brands: The Bridge to Better Brands, 27 May 2015, http://www.sustainablebrands.com/news_and_views/stakeholder_trends_insights/sustainable_brands/study_81_consumers_say_they_will_make_

[3] “General Mills; General Mills Continues Clean Energy Leadership; Signs Wind Power Agreement.” The Business of Global Warming, Jun 19, 2017, pp. 69, Business Premium Collection, http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1910216600?accountid=11311.

[4] Corporate Value Chain (Scope 3) Standard. Greenhouse Gas Protocal, http://www.ghgprotocol.org/standards/scope-3-standard.

[5] General Mills. Policy on Climate. July 2014. Web. http://www.generalmills.com/en/News/Issues/climate-policy

[6] “General Mills Announces New Commitment on Climate Change.” Corporate Social Responsibility Newswire, 31 Aug. 2015. Web. http://www.csrwire.com/press_releases/38222-General-Mills-Announces-New-Commitment-on-Climate-Change

[7] “General Mills Recognized as World Leader for Corporate Action on Climate Change.”PR Newswire, Jan 26, 2017, Business Premium Collection, http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1861916580?accountid=11311.

[8] Nunes, Keith. “Evaluating General Mills’ Sustainable Sourcing Scorecard.” Food Business News, 8 Apr. 2015. Web. <http://www.foodbusinessnews.net/articles/news_home/Business_News/2015/04/Evaluating_General_Mills_susta.aspx?ID=%7BD57FADF2-D9BE-4B68-B10A-39EBCA99E94F%7D&cck=1>

[9] Dauvergne, Peter. “Is the Power of Brand-Focused Activism Rising? the Case of Tropical Deforestation.” Journal of Environment & Development, vol. 26, no. 2, 2017, pp. 135-155, Business Premium Collection, http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1899206585?accountid=11311, doi:http://dx.doi.org.ezp-prod1.hul.harvard.edu/10.1177/1070496517701249.

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4 thoughts on “Sustainability in Food: How General Mills is Combating Climate Change

  1. Thanks for the article HBSTOM17. To your question about how large companies can continue to demonstrate their dedication to addressing climate change while growing their top/bottom lines, I think aggressively marketing the mission will certainly play a vital role. In addition, I think companies can also make an effort to educate consumers on how pervasively climate change in general will impact their lives. As your piece mentions and also highlighted by a Nielsen study, many consumers say they are willing to pay more for products and services provided by companies that are committed to positive and social impact[1]. This actually makes me think about our IKEA class. I previously did not know about IKEA’s commitment to sustainability. However, I will fully admit that in now knowing their mission, I think more favorably of IKEA and feel that buying their products is somewhat of a proxy for contributing to sustainability.

    Ultimately, increasing revenue growth in tandem with demonstrating a commitment to climate change requires the end-consumer to be aware of the issue and for the company to display the cause as part of their marketing efforts. By presenting the problem and marketing how the company is contributing solutions, corporations invite consumers to also alleviate the problem by buying their products.

    [1] Adams, Anne Taylor. “GLOBAL CONSUMERS ARE WILLING TO PUT THEIR MONEY WHERE THEIR HEART IS WHEN IT COMES TO GOODS AND SERVICES FROM COMPANIES COMMITTED TO SOCIAL RESPONSIBILITY.” Nielsen, 17 June 2014, http://www.nielsen.com/us/en/press-room/2014/global-consumers-are-willing-to-put-their-money-where-their-heart-is.html.

  2. Great article! I agree with the recommendations that you’ve laid out, but think two additional steps must be taken for this effort to be successful:

    • Apply pressure on suppliers to live up to standards: Large CPG organizations like General Mills have significant bargaining power with their suppliers. A recent McKinsey study suggests that while consumer companies are driving towards sustainability, they are not applying the required pressure on their suppliers [1]. Levers such as developing strict guidelines and conducting regular audits can ensure that suppliers are aligned with General Mills’ sustainability goals. Some companies are leveraging digitization to collect supplier sustainability data remotely, which can be used to offer incentives or impose penalties.

    • Provide transparency of sustainability metrics: While General Mills has provided some clarity on their sustainability goals and evaluation criteria (as shown in the Sustainability Update chart), in order to gain consumer trust, the company should be completely honest and transparent with its consumers. Research shows that 21st century consumers expect this from the organizations they purchase from [2]. Not only will this help educate consumers about the progress of General Mills’ sustainability efforts, but will also hold them accountable to the goals that they’ve set forth.

    [1] Bové Anne-Titia. “Starting at the source: Sustainability in supply chains.” McKinsey & Company, November 2016, https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/starting-at-the-source-sustainability-in-supply-chains.

    [2] Whelan, Tensie. “The Comprehensive Business Case for Sustainability.” October 21, 2016, https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability.

  3. I agree with your opening argument that sustainability initiatives may help companies’ top and bottom line due to consumers’ increasing awareness of climate change and endorsement of socially responsible products. While consumer acceptance is an important factor, I think sustainable sourcing of raw materials also saves money for General Mills in the long run. By promoting sustainable agriculture along its vast supply chain, Mills can ensure the farms that supply its factories optimize for long-term production volume, thereby reducing the likelihood of surging input prices driven by climate-induced shortages.

    I really like your recommendations about eliminating high-risk ingredients, partnering with NGOs, and educating consumers. An additional proposal would be to gather other large purchasers of global agricultural products to set industry standards regarding sustainable sourcing. This could potentially promulgate Mills’ climate best practices to a wider range of actors. It also alleviates some concern that Mills may lose out to competitors seeking cost advantages through irresponsible sourcing practices, if the whole industry agrees to the same set of standards.

  4. Great post! I agree with your recommendations to address climate change threats but I would add another one: collaborating with other large food companies to develop innovative sustainable solutions. For example, General Mills could join the Bioplastic Feedstock Alliance, a partnership between WWF, Pepsico, Nestle, Danone and other large companies that has developed packaging made out of plant-based plastic. To slow the impact of climate change, General Mills could benefit from sharing best practices with other companies facing similar challenges and those collaborations can have a much larger impact than a single company making changes on their own.

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